Veidekke ASA: Fourth-quarter and full-year 2018 results

Veidekke ASA: Fourth-quarter and full-year 2018 results

07.02.2019 - 08:00

Veidekke achieved revenue of NOK 10.5 billion in the fourth quarter, and a pre-tax profit of NOK 341 million. The Q4 order inflow of NOK 9.2 billion brought the year-end order book to NOK 34.6 billion. In 2018 as a whole, the group generated sales revenue of NOK 35.6 billion and a pre-tax profit of NOK 591 million. The annual profit per share amounts to NOK 4.0 (IFRS). Based on the group’s robust financial position, strong order book and positive market outlook, the board is proposing an unchanged ordinary dividend of NOK 5.0 per share for the financial year 2018.

“Veidekke boosted sales in the fourth quarter, but profits were somewhat weaker than last year. While non-residential activity levels were satisfactory in all three countries, the low number of new residential building starts in earlier quarters resulted in somewhat lower production. The property development operation delivered a strong profit in the current market, thanks to ongoing residential sales and development gains on sales of residential and commercial projects,” says Veidekke Group CEO Arne Giske.

“Looking at 2018 as a whole, Veidekke achieved high growth, and the year-end order book is robust. Our annual result and profitability, however, were significantly weaker than we would like, and we have implemented a number of measures which we expect to have a clear positive impact on future results and profitability. Our market prospects are positive, and our financial position is good, and we have great faith in the group’s development going forward. This is further confirmed by the board’s proposal to maintain a dividend of NOK 5.0 per share for the financial year 2018,” says Giske.

“Two Veidekke employees died in workplace accidents on 20 November and 13 December 2018. Safety has the highest priority for Veidekke, and we recognise that keeping our staff safe is a daily battle, fought at each individual workplace. These accidents and a general increase in the number of recorded injuries in 2018 underline the need for a constant safety focus and intensified preventive efforts,” says Arne Giske.

Veidekke achieved robust growth in the fourth quarter of 2018, with revenues totalling NOK 10.5 billion, compared to NOK 8.7 billion in Q4 2017. The increase is attributable to the Norwegian and Swedish building construction operations. The achieved growth was mainly organic, but also stems from business acquisitions in 2018.

Revenue increased by 13% in 2018, to NOK 35.6 billion from NOK 31.4 billion in 2017. This growth was powered by the construction operation, with higher revenues being achieved in all three countries. The property development operation suffered a fall in revenue in 2018 due to lower residential sales and few building starts. The revenues of the industrial operation were on a par with 2017.

The pre-tax profit for the quarter amounted to NOK 341 million, compared to NOK 381 million in Q4 2017. In the property development operation, development gains from sales of both residential and commercial projects contributed to a satisfactory quarterly performance. The construction operations generated profits on a par with last year, although the profit margin was lower. The fourth quarter is generally a low season in the industrial operation, as reflected in the profit performance. The drop compared to last year is primarily due to the inclusion of a NOK 70 million sale gain in the 2017 fourth-quarter results.

The 2018 pre-tax profit totalled NOK 591 million, compared to NOK 1,311 million in 2017. Profits were primarily impacted by project write-downs of NOK 550 million linked to the Norwegian civil engineering operation, which were recognised in Q2 2018. The underlying profit for 2018 – excluding the write-downs – totalled NOK 1,141 million. Reduced sales and fewer new residential building starts in Sweden negatively impacted the profits of the property development operation, while increased raw material prices and lower capacity utilisation resulted in a poor profit performance by the industrial operation.

The Q4 order intake of NOK 9.2 billion brought the order book to NOK 34.6 billion, up from NOK 33.8 billion at the end of Q3 and NOK 32.6 billion one year ago. Approximately NOK 23 billion of the order book will be converted into revenue during the course of 2019.

To improve profitability, Veidekke reorganised its operational businesses in the second half of the year, splitting the Norwegian construction operation into a building construction unit and a civil engineering unit, gathering the group’s Scandinavian residential, commercial and project development activities under one executive vice president and making the industrial operation a separate business area under the direct supervision of the Group CEO. Moreover, measures have been implemented to reduce capital use and improve project risk management.

This information is disclosable pursuant to section 5-12 of the Securities Trading Act.

Veidekke is one of Scandinavia's largest construction and property development companies. The company undertakes all types of building construction and civil engineering contracts, develops residential projects, maintains roads, and produces asphalt and aggregates. The company is known for its involvement and local knowledge. Its annual turnover is NOK 36 billion, and half of its 8,600 employees own shares in the company. Veidekke is listed on the Oslo Stock Exchange and has always posted a profit since it was founded in 1936.